News from Notch Consulting, Inc.

October 30, 2008

Cabot Announces 4Q 2008 and Full FY Results

Filed under: Carbon Black — Notch @ 9:45 am

Cabot Corp. announced 4Q and full fiscal year earnings on Wednesday, October 29. The conference call to discuss results will be held today (Thursday, October 30) at 2:00 pm EST.

Here are the results.

Cabot reported net sales of $853 million for 4Q 2008, up from $675 million during the same quarter of 2007, and net sales of $3,191 million for full year 2008, up from $2,616 million for FY 2007. Net income was $11 million for 4Q 2008, down from $24 million in 4Q 2007. Net income for full year 2008 was $85 million, down from $129 million for FY 2007.

Excerpts from the release:

Commenting on the results, Patrick Prevost, Cabot’s President and CEO, stated, “Although we are not pleased with our operating results this quarter, I am confident in the underlying strength of our businesses. Key drivers of this quarter’s performance are first, as anticipated, the negative time lag effect in our rubber blacks supply contracts was unprecedented. Rubber Blacks nonetheless improved profitability despite the difficult operating environment through strong margin and cost management. Second, the softening economic environment became more global in scope and affected our volumes during the quarter, particularly in the automotive and construction sectors. Third, our other income and expense was unfavorably affected by $9 million from the non-cash translation of intercompany loans, denominated in U.S. dollars, provided to our Brazilian subsidiary, whose currency depreciated during the quarter.”

Prevost continued, “It is clear that the global macroeconomic issues have begun to affect our business results in the form of reduced demand in some of our key industrial sectors. Our conservative financial practices have positioned us with a strong balance sheet to withstand these turbulent conditions and we remain focused on executing our longer term strategies to further advance our position as a global market leader.”

Results for Rubber Blacks:

Rubber Blacks profitability increased by $13 million when compared to the fourth quarter of 2007. Solid margin management and lower fixed manufacturing costs allowed the Business to overcome a significant unfavorable contract lag ($36 million) and lower volumes ($8 million). Volumes declined by 7% driven by economic softness in all regions as our tire customers reduced production on weaker demand. The Americas declined by 10%, with North America down 7% and South America down 15%; the Europe, Middle East, Africa region was down 6%; and Asia Pacific was down 6% overall, with China down 16%, in part due to the Olympics, more than offsetting an increase of 3% in the rest of Asia. For the full fiscal year 2008, operating profit before tax (“PBT”) increased despite the unfavorable contract lag and difficult economic conditions, which led to flat volumes. The Business was able to offset the vast majority of these unfavorable factors through solid margin management and strict control on manufacturing spending, and also benefited from foreign currency translation. The time lag of feedstock related pricing adjustments in the Company’s rubber blacks supply contracts had an unfavorable impact of $36 million and $66 million for the fourth quarter and full fiscal year 2008, respectively. This is compared to an unfavorable impact of $13 million and $6 million in the same periods of 2007.

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